Question

Describe two potential sources of inefficiency in health care markets.

Rubric:

The conclusion/opinion is supporting using specific examples from economic theory, empirical evidence or policy issues and are clearly connected to the question

Includes correct facts and definitions concerning economic theory, evidence or policy issues.

Answer 1

Inefficiency in any portion of the health system leads to a number of unwanted effects, including patient results that are relatively poorer. If the resources of the finite health scheme are not used effectively, some people will also be refused access to care.
From a wider view, inefficiencies in the health system can distract resources from other economic industries where resources can be put to excellent use.
Furthermore, not only does increased efficiency make it possible to spend money more effectively, but the ability to eliminate waste also shows good stewardship of the health system, which can persuade governments and citizens to fund universal health coverage.

Failure of competition- In many fields, the hospital sector is extremely focused, though there is wider competition for physician services. The implementation of antitrust can play a part. Government also impacts competition by trading it through the patent scheme for incentives to innovate. As is the case with health insurance, competition can never be ideal in health care. Because of both supplier and patient variables, the products, treatments, are not identical. Health care services, therefore, do not really compete as equal products with each other. Each has its own degree of monopoly power and is a distinctive product. This is a source of market power that can not be fully purged from a market-based health system, no matter what

Externalities- Herd immunity is a beneficial health care externality. Increased academic achievement and the involvement of the workforce connected with excellent health may therefore be possible. Both can decrease government program requirements and boost economic growth that benefits society in ways that are not captured by health care transaction respondents. Therefore, health care could be under-provided by the market. (A related phenomenon is that a health insurer does not rationally' invest' its policyholders in preventive care because it is unlikely to capture long-term benefits as policyholders switch to other insurers.) Government mandates and subsidies are among the possible responses.

Information asymmetries- Doctors usually understand more about how patients will be affected by health facilities than do patients. This can foster demand induced by the supplier, contributing to an inefficiently high utilization level. In general, solutions in the private sector can be as effective or more effective than solutions in the public sector. They included different ways of contracting, tracking, detecting fraud and managing care.